May 31, 2010

On a recent evening, for instance, Angela Otero stopped by the Sam’s Club in Secaucus and printed out four pages of eValues offers at a bright green kiosk near the front door, including $50 off a plasma television, $3 off a 30-pack of toilet paper and $2.50 off a box of meatless burgers.

Ms. Otero said she had used eValues since it started in August and found that the discounts covered “the majority of things I want.”

“The detergents, TV dinners once in a while,” she said, scanning through her printout of deals. “There’s a dollar off Bounce. I use that all the time.”

“It’s basically my own grocery list,” she said.

Linda Vytlacil, vice president for member insights and innovation at Sam’s Club, said coupons normally had a response rate of 1 percent or 2 percent. With eValues, she said, as many as 20 percent to 30 percent of eligible customers collect the discount they are offered.

The program is available only to Sam’s Club’s “Plus” members, who pay a higher yearly membership fee than do regular members. They can view the deals by e-mail, on the Sam’s Club Web site or at store kiosks.

“There’s no clipping coupons,” Ms. Vytlacil said, adding that eValues offered “highly individual relevant offers specific to each Plus member. All they have to do is purchase the product, and the savings are automatically applied at checkout.” Like other membership clubs, shoppers must present a card at checkout.

The eValues program is the latest iteration in the fast-growing field known as predictive analytics, which uses vast amounts of data to spot trends and anticipate consumer behavior.
Two of the best-known users of applications of predictive analytics are baseball executives, who scour statistics to find overlooked superstars, and the online DVD rental service Netflix, which suggests movies its customers might like.

The dating service eHarmony also uses the practice to match potential mates, and eLoyalty, which sells customer service technology, uses algorithms to analyze customer calls to make them more effective and efficient.

For instance, based on a day’s worth of calls, eLoyalty can predict which customers are likely to cancel their accounts. Using that information, a company can then call back those customers to try to save their business and can use the initial call to train its employees to do better.

“The goal is to have customer service reps speak to the customer in the way they want to be spoken to,” said Jason Wesbecher, eLoyalty’s vice president for sales and marketing. “We are trying to rescue customers trapped in service hell.”

Of course, retailers have long tried to decode consumer behavior, through surveys or test panels, or by using crude forms of data analysis. During the last decade or so, many retailers have amassed huge amounts of data through loyalty programs or membership cards, like those provided by Sam’s Club and its rival, Costco.

But retailers have generally done little with the information, other than using the cards as a branding opportunity or to offer broad discounts
Working with FICO, the company best known for providing credit scores, Sam’s Club has improved its ability to predict what each customer will buy and the time frame in which that purchase will occur.

For any product discount, Sam’s Club can vary the message and price in the communication received by the customer, said Andrew N. Jennings, FICO’s chief research officer. Aside from the cost savings, tailored messages to consumers can also highlight specific product attributes that a particular consumer typically seeks, like “organic” or “environmentally friendly,” he said.
The messages are aimed at encouraging repeat buys or enticing a first-time purchase, while avoiding conflicting promotions, Mr. Jennings said.

Some privacy advocates worry that customers are becoming too willing to allow corporations to gather and exploit their shopping histories. Most users of the data, Sam’s Club included, insist they have rigorous protocols to protect customer privacy.

And for all of its sophistication, there is no guarantee that eValues will be a hit. Most shoppers observed during several recent visits to the Secaucus store went about their shopping seemingly oblivious to the eValues kiosk.

In several instances, shoppers stopped to use the kiosk, but a scanner failed to read the bar code on their cards, forcing employees to manually type in their membership numbers.

Still, some shoppers said they were impressed by the deals they were receiving using eValues. Ricardo Mayoral printed out four pages of deals at the kiosk, including discounts on orange juice, ice cream sandwiches, televisions and chicken breasts.

“I got like $2 off the bananas, a $1 off the Toasted,” he said, referring to a package of crackers in his cart. Mr. Mayoral, 36, said the best eValues deal yet was $300 off a $1,200 television.

“I remember that day,” he said later. “I came to buy food, and I bought two TVs.”

Brad Bogan, 44, who works near the Secaucus store, said he signed up for a Plus membership during a recent promotion and had more than covered his costs with eValues savings. (Plus members pay $100 a year; regular members pay $40.)

Even so, convenience sometimes trumps value. Mr. Bogan is not renewing his Plus membership because his office is moving farther away from the Secaucus store and there is not a Sam’s Club near his home.

“We use BJ’s more than we do Sam’s,” he said, referring to BJ’s Wholesale Club. “There’s a BJ’s right down the street.”

Thailand’s king, Bhumibol Adulyadej, has a personal net worth estimated at $35 billion, making him the world’s wealthiest monarch, well ahead of No. 2, the oil-rich Sultan of Brunei, with just $20 billion.

The average annual income of Thailand’s 67 million people is about $8,000, or 95th among the world’s 194 countries. Not especially bad. Not particularly good. Just right for making the tens of millions nearest the bottom bitterly aware that they hold the short end of the stick in the burgeoning Land of Smiles. This yawning economic crevasse between the constitutional ruler and the vast majority of his subjects dramatizes the core issue at the heart of the bloody uprising that shook the streets of Bangkok last week, forcing the country toward the brink of chaos and uncertainty.

The divide

Not that many Thais complain about Bhumibol’s vast fortune. They do not. Most praise his years of hard work, personal interest and generous contributions to development, particularly in the poor and populous northeastern part of the country. Of course, under Thailand’s harsh lèse-majesté laws, criticizing any member of the royal family is punishable by up to 15 years’ imprisonment.
…
With the 82-year-old Bhumnibol sick and failing and his son, Crown Prince Vajiralongkorn, loathed for a range of excesses, millions of Thais fear being cast adrift. The only alternative, they reason, is to remake Thailand from the peculiar admixture it is today into a full-fledged democracy. That prospect, in turns, frightens numerous others.
Economic fissures have been broadening gradually since the days of the Vietnam War, when the U.S. pumped billions into making Thailand a base for bombing missions and a springboard for anti-communist “hearts and minds” campaigning. The king, bolstered by Washington, worked assiduously and, for the most part, effectively to hold Thais together. Bhumibol evolved into the nation’s father.

In the aftermath of the Vietnam War, Thailand prospered. But the rural masses did not keep pace. Bangkok boomed into a rough-hewn center of stunning high-rise towers, its streets choked with Mercedes Benzes and BMWs. In the countryside, motorcycles and pickups became more commonplace, but the daily lives of peasant farmers differed little from what they had been for centuries.http://www.usatoday.com/news/opinion/forum/2010-05-27-column27_ST2_N.htmhttp://www.prospectmagazine.co.uk/2010/05/democracy-in-danger/
Democracy in danger
The late political scientist Samuel Huntington was one of many academics to link class and democracy. He argued that economic growth in developing countries expands the middle class, which, as it becomes wealthier and more educated, demands social, political and economic rights, largely to protect its gains. Meanwhile, as that middle class grows, regimes become more dependent on its entrepreneurs to power economic growth and authoritarian leaders are forced to listen to their demands. Such influence opens up the political system, with political and property rights following.

For decades, history seemed to uphold this theory, beginning with southern Europe after the second world war and extending to east Asia in the early 1990s. Nations developed their economies, middle classes blossomed, and educated urban people began to demand their rights. After 1990, the number of democracies rocketed: eastern and central Europe, much of Africa, and most nations in east Asia became democratic. By 2005, for the first time, more than half the world’s population was living in a democracy. Sometimes this had happened because the middle class took to the streets to topple the autocrats, as in Thailand’s “Black May” 1992 demonstrations against the military government. In other cases, as in Taiwan and Chile, economic growth and middle-class pressure led to incremental political change and, finally, after the passing of a long-time dictator, democracy.

So far, so good. The same seemed to be true in the Philippines, where a liberal constitution was passed following the 1986 revolution. “You had a lot of hope that [dictator Ferdinand] Marcos was gone and it’d be a different country,” Philippine human rights activist Harry Roque told me. “It was the high point.” Then, as with any revolution, reality set in.

The Thai example
Such violence is increasingly common in a country once regarded as one of the most stable nations in southeast Asia. The present difficulties began in 2006, when another wave of street protests swept Bangkok, this time led by lawyers, doctors and small-business people. These rallies of thousands of middle-class urbanites demanded the removal of the then prime minister, Thaksin Shinawatra—a charismatic populist backed by the rural poor. After months of rallies, some of which openly agitated for a coup to “save” Thailand’s democracy, the movement got its wish. In September 2006, the armed forces took over the government.

These crises have their roots in the uncertainties of globalisation. Buffeted by the 1997 Asian financial crisis, Thailand’s national mood shifted sharply from the reformist early 1990s. Middle-class Thais began to focus on making and saving money rather than political change. The same was true in the Philippines, where years of political instability, highlighted by endless infighting, saw many Filipinos tune out of politics. In Russia, years of post-cold war economic instability under Boris Yeltsin soured attitudes to political change. When Yeltsin exited the political scene, many Russians hoped they could just ignore politics altogether. “Their main interest now seems to be to consolidate their material wealth and social status,” said Dmitri Trenin, a Russian political expert at the Carnegie Endowment for International Peace in Moscow.
The first explanation is that first-generation democratic leaders have too often turned into elected autocrats. They come to see democracy as a process in which electoral victory provides a mandate to obliterate their opposition—which in turn fuels middle-class rage, then frustration. Perhaps most famously, Vladimir Putin, riding on high approval ratings while Russian president in the early 2000s, stripped regional governors of influence, eviscerated the national parliament and began to neuter influential media. Although his successor Dmitri Medvedev has given speeches calling for greater freedom, most Russian political analysts believe his commitment to democracy is no more sincere than Putin’s. Worse, Medvedev oversaw a constitutional change that would allow Putin, now prime minister, to reclaim the presidency in 2012.

Venezuela’s Hugo Chávez appears to be deploying similar tactics, using his power to entrench his allies and undermine checks on his presidency—for instance, by revoking the licence of the nation’s most vocal private television network and those of dozens of radio stations. Last December, he jailed a judge after she issued a ruling that displeased him. He gutted his once effective national oil company, filling it with loyalists, while criminalising critics who offer “false” information that harms “the interests of the state.”

In Thailand, former Prime Minister Thaksin’s “war on drugs” may have been a cover to remove opposition: thousands of people, ranging from political opponents to actual drug dealers, were killed. He also used lawsuits and threats to intimidate opposition lawmakers and silence the press. Similarly, in Nicaragua, for instance, where since returning to office in 2007, a revived Daniel Ortega has used questionable laws to block the opposition.
Weak institutions
It would have been possible to deal with these elected autocrats had it not been for a second problem: weak democratic institutions. In Russia nearly every opposition group eventually succumbed to Putin. In autumn 2008, the Union of Right Forces, the last truly independent Russian political party, merged with other pro-Kremlin groups. The few remaining opponents, like chess champion-turned politician Garry Kasparov, command little popular support. In Cambodia—a nation marked by its inability to build durable institutions to underpin its fragile democracy—Prime Minister Hun Sen unleashed a campaign of intimidation, including the murder of political opponents. Such weak democracies also spawn a less violent but just as damaging problem: corruption. During an era of authoritarian rule, corruption is usually predictable: the regime siphons off a proportion of money, but the problem is quite contained. Yet young democracies often see old channels of corruption vanish only to be replaced by a more complex system in which many different actors—local political bosses, bureaucrats—have their hands out. Such graft quickly discredits democracy in the eyes of once-hopeful citizens.

Vested interests
The global financial crisis has led many in developing nations to wonder whether capitalism has failed, and how much of that failure should be laid at the feet of democracy. But a more pressing anti-democratic force arises in the middle classes’ realisation that they have much to lose from real enfranchisement. In Bolivia, middle-class demonstrators launched an anti-government campaign in 2008 against President Evo Morales, a populist former union leader. They came mainly from the country’s wealthier eastern half, where business leaders worried about Morales’s plans to nationalise mineral and oil wealth, push out foreign companies and raise business taxes to boost welfare. The protesters soon caused more chaos than Morales had, especially when, in August 2008, they shut down major roads and attacked police.

This is part of a further pattern where, once they have turned against elected leaders, angry middle-class protesters use undemocratic means to topple presidents, and in turn to build a more elitist form of democracy in which they would hold most of the power. This has certainly been true in Thailand, while in the Philippines, Manila’s urban elites seem almost addicted to demonstrations. In 2001, they poured into the streets to topple Joseph Estrada, a former actor who rose to power on his macho appeal with the underclass (before allegedly using his office to rake in vast sums of money from illegal gambling). The protesters later gathered again in an unsuccessful attempt to oust Gloria Macapagal-Arroyo, accused of subverting democracy and tolerating massive graft.

The dramatic 2009 coup in Honduras saw a similar story. There, President Manuel Zelaya pushed to change the constitution to give himself longer in office, and appeared to be rigging a referendum. He also enacted populist economic policies, including a hike in the minimum wage, which angered many business owners. As the day of the referendum drew near, Zelaya’s middle-class opponents and their allies in the Honduran congress began to protest. In June 2009 the military stepped in, forcing Zelaya into exile. In the subsequent election the conservative National party, backed by the middle class, won the vote.

The great divide
To be sure, the middle classes have not all turned against democracy. In Iran, urbanites have led the protests against Mahmoud Ahmadinejad’s increasingly dictatorial regime. In Burma, a country suffering some of the worst human rights abuses in the world under the ruling junta, middle-class students have continued to push for democracy. Nonetheless, a distinct pattern of disillusionment also holds true in older, more consolidated democracies—India and Chile, for instance—where the middle class has become cynical about politics. Here democracy has sunk deep enough roots that are nearly impossible to cut out. But such disillusionment is often reflected in low voter turnout—in Chile voting is mandatory, but in the December 2009 presidential election, millions of people did not even register to vote despite possible fines. In Ukraine, the middle class has grown disillusioned with corruption and the failings of its politicians.

Once the middle class turns there are few options. Strongmen like Chile’s Augusto Pinochet could, in the past, credibly claim to swap democracy for economic growth. But such a bargain rarely works these days. The military can still seize power, but it normally proves incapable of governing. In the past, the generals could appoint a few capable technocrats. But today most developing economies are linked to global markets, requiring more advanced management to retain the confidence of foreign investors. Such a pattern has been seen in Thailand and in countries such as Fiji, where the military took power in a coup in 2006, only to see the economy slide into decline and the country thrown into social unrest.

A return to “soft authoritarianism”—a prime minister chosen by the elites, for instance—is also problematic. Citizens with a taste for democracy are much less likely to accept oligarchic rule—and the poor increasingly form noisy protest groups to combat the middle-class demonstrators. Such protests can lead to a permanent divide: once the middle class and the poor worked together to fight for democracy, but a democratic unravelling often pits the two against each other.

These newly anti-democratic tendencies do not only threaten political reform worldwide. They also confound democracy promotion groups in the west. Many such groups now doubt whether building a middle class actually encourages the global spread of freedom. “You have all these Thai liberals who would condemn human rights abuses in a place like Burma, but then they support the [2006] coup,” says one US-based human rights activist. “How can they do both?”

If the west wants to reverse the recent slide, it needs a new strategy. For one, it must stop its tacit support for coups, which only deepen social divides and create precedents for toppling elected governments. Washington does seem to be getting this message. During the 2002 coup in Venezuela the White House tacitly condoned the putsch; after the 2009 coup in Honduras, President Obama spoke out strongly against the military takeover. Though the US in effect condoned the 2006 coup in Thailand, this time, senior American officials have been careful to meet not only with Bangkok’s elite but also with the red-shirted protesters, while the Obama administration has quietly told the Thai government that it does not support another military intervention.

Pro-democracy groups, both inside and outside developing nations, must also abandon the assumption that simply building a middle class will guarantee democratisation. Instead, they should focus on building the kind of middle class that is comfortable with a poorer class that also has political power.

And leaders elected largely by the poor will have to recognise that they must uphold the rule of law, or risk alienating the middle class and the elites who normally control business, the military and other critical segments of society. In some countries, this process has already begun. In Brazil, Luiz Inácio Lula da Silva was elected in 2002 partly because of his popularity among the poor. But he quickly modified his leftist, populist views to win over his country’s middle class and succeeded in both growing the economy and instituting successful anti-poverty programmes.

The west’s definition of democratisation must also move beyond simply the holding of regular, free elections to include rights and liberal institutions. Paul Collier notes in his 2009 book Wars, Guns, and Votes, that this “elections equal democracy” thinking in the poorest nations in Africa can spark horrific ethnic conflict, since elections, without any other institutions of democracy, become simply another arena for tribal conflict. The same problem is clearly evident beyond Africa, where newly elected autocrats feel free to trample on minority rights after winning a poll.

Instead, developing nations could consider proportional representation, which can protect minority rights and encourage coalitions that bring together the poor and middle classes. Aid donors should invest in promoting constitutionalism—the development of institutions that create and solidify the rule of law—while also promoting and monitoring elections. Foreign countries could also promote constitutionalism by funding training for the legal profession, and by using aid money not only to educate officials and politicians but to fund civil society activists, and others who might be involved in drawing up more progressive constitutions or, later, in upholding constitutional values.

If established democracies and developing nations don’t make these new investments in the middle class, the result will not be pretty. Thailand now faces a permanent divide between the middle class and elites on one side, and the poor on the other. When the country holds elections again in the autumn, a pro-poor party is likely to win, since the poor comprise the majority of he population. Yet the middle class and elites are unlikely to simply cede power, and could launch a new wave of violence that might lead to another coup. “The country is just paralysed by fear,” one senior Thai official told me, shaking his head. “Any option now is bad.” Unfortunately, from Cambodia to Venezuela, many developing nations are in a similar bind.

Map: elected leaders who turn into autocrats
kurlantzick-link
Click here to see the map full-size

Like a street gang showing off its power to run amok in a well-heeled neighborhood, the North Koreans launch a missile over Japan or set off a nuclear test or stage an attack — as strong evidence indicates they did in March, when a South Korean warship was torpedoed. Expressions of outrage follow. So do vows that this time, the North Koreans will pay a steep price.

In time, though, the United States and North Korea’s neighbors — China, Japan, South Korea and Russia — remind one another that they have nothing to gain from a prolonged confrontation, much less a war. Gradually, sanctions get watered down. Negotiations reconvene. Soon the North hints it can be enticed or bribed into giving up a slice of its nuclear program. Eventually, the cycle repeats.

The White House betting is that the latest crisis, stemming from the March attack, will also abate without much escalation. But there is more than a tinge of doubt. The big risk, as always, is what happens if the North Koreans make a major miscalculation. (It wouldn’t be their first. Sixty years ago, Mr. Kim’s father, Kim Il-sung, thought the West wouldn’t fight when he invaded the South. The result was the Korean War.)

What’s more, the dynamic does feel different from recent crises. The South has a hardline government whose first instinct was to cut off aid to the North, not offer it new bribes. At the same time, the North is going through a murky, ill-understood succession crisis.

And President Obama has made it clear he intends to break the old cycle. “We’re out of the inducements game,” one senior administration official, who would not discuss internal policy discussions on the record, said last week. “For 15 years at least, the North Koreans have been in the extortion business, and the U.S. has largely played along. That’s over.”

That may change the North’s behavior, but it could backfire. “There’s an argument that in these circumstances, the North Koreans may perceive that their best strategy is to escalate,” says Joel Wit, a former State Department official who now runs a Web site that follows North Korean diplomacy.

The encouraging thought is the history of cooler heads prevailing in every crisis since the Korean War. There was no retaliation after a 1968 raid on South Korea’s presidential palace; or when the North seized the American spy ship Pueblo days later; or in 1983 when much of the South Korean cabinet was killed in a bomb explosion in Rangoon, Burma; or in 1987 when a South Korean airliner was blown up by North Korean agents, killing all 115 people on board.

So what if this time is different? Here are five situations in which good sense might not prevail.

An Incident at Sea

Ever since an armistice ended the Korean War, the two sides have argued over — and from time to time skirmished over — the precise location of the “Northern Limit Line,” which divides their territorial waters. That was where the naval patrol ship Cheonan was sunk in March. So first on the Obama administration’s list of concerns is another incident at sea that might turn into a prolonged firefight. Any heavy engagement could draw in the United States, South Korea’s chief ally, which is responsible for taking command if a major conflict breaks out.

What worries some officials is the chance of an intelligence failure in which the West misreads North Korea’s willingness and ability to escalate. The failure would not be unprecedented. Until a five-nation investigation concluded that the Cheonan had been torpedoed, South Korea and its allies did not think the North’s mini-submarine fleet was powerful enough to sink a fully armed South Korean warship.

Shelling the DMZ

American and South Korean war planners still work each day to refine how they would react if North Korea’s 1.2 million-man army poured over the Demilitarized Zone, 1950s-style. Few really expect that to happen — the South Koreans build and sell expensive condos between Seoul and the DMZ — but that doesn’t mean the planning is unjustified.

In one retaliatory measure last week, South Korea threatened to resume propaganda broadcasts from loudspeakers at the DMZ. In past years, such blaring denunciations, of Kim Jong-il’s economic failures, were heard only by North Korean guards and the wildlife that now occupies the no-man’s land. Still, the threat was enough to drive the North’s leadership to threaten to shell the loudspeakers. That, in turn, could lead to tit-for-tat exchanges of fire, and to a threat from the North to fire on Seoul, which is within easy reach of mortars. If that happened, thousands could die in frenzied flight from the city, and investors in South Korea’s economy would almost certainly panic.

American officials believe the South is now rethinking the wisdom of turning on the loudspeakers.

A Power Struggle or Coup

Ask American intelligence analysts what could escalate this or a future crisis, and they name a 27-year-old Kim Jong-un, the youngest of Kim Jong-il’s three sons, and the father’s choice to succeed him. Little is known about him, but his main qualifications for the job may be that he is considered less corrupt or despised than his two older brothers.

One senior American intelligence official described the succession crisis this way: “We can’t think of a bigger nightmare than a third generation of the Kim family” running the country with an iron hand, throwing opponents into the country’s gulags, and mismanaging an economy that leaves millions starving.

It is possible that on the issue of succession, many in the North Korean elite, including in the military, agree with the American intelligence official. According to some reports, they view Kim Jong-un as untested, and perhaps unworthy.

“We’re seeing considerable signs of stress inside the North Korean system,” another official reported.

And that raises the possibility of more provocations — and potential miscalculations — ahead.

One line of analysis is that the younger Kim has to put a few notches in his belt by ordering some attacks on the South, the way his father once built up a little credibility. Another possibility is that internal fighting over the succession could bring wide-scale violence inside North Korea, tempting outside powers to intervene to stop the bloodshed.

Curiously, when Kim Jong-il took the train to China a few weeks ago, his heir apparent did not travel with him. Some experts read that as a sign that the Kim dynasty might fear a coup if both were out of the country — or that it might not be wise to put father and son on the same track at the same time, because accidents do happen.

An Internal Collapse

America’s most enduring North Korea strategy isn’t a strategy at all; it’s a prayer for the country’s collapse. Harry Truman, Dwight Eisenhower and John F. Kennedy hoped for it. Dick Cheney tried to speed it.

The regime has survived them all.

But could the North collapse in the midst of the power struggle? Sure.

And that is the one scenario that most terrifies the Chinese. It also explains why they keep pumping money into a neighbor they can barely stand.

For China, a collapse would mean a flood of millions of hungry refugees (who couldn’t flee south; there they are blocked by the minefield of the DMZ); it would also mean the possibility of having South Korea’s military, and its American allies, nervously contending with the Chinese over who would occupy the territory of a fallen regime in order to stabilize the territory. China is deeply interested in North Korea’s minerals; the South Koreans may be as interested in North Korea’s small nuclear arsenal.

A Nuclear Provocation

With tensions high, American spy satellites are looking for evidence that the North Koreans are getting ready to test another nuclear weapon — just as they did in 2006 and 2009 — or shoot off some more long-range missiles. It is a sure way to grab headlines and rattle the neighborhood. In the past, such tests have ratcheted up tension, and could do so again. But they are not the Obama administration’s biggest worry. As one of Mr. Obama’s top aides said months ago, there is reason to hope that the North will shoot off “a nuclear test every week,” since they are thought to have enough fuel for only eight to twelve.

Far more worrisome would be a decision by Pyongyang to export its nuclear technology and a failure by Americans to notice.

For years, American intelligence agencies missed evidence that the North was building a reactor in the Syrian desert, near the Iraq border. The Israelis found it, and wiped it out in an air attack in 2007. Now, the search is on to find out if other countries are buying up North Korean technology or, worse yet, bomb fuel. (There are worries about Myanmar.)

In short, the biggest worry is that North Korea could decide that teaching others how to build nuclear weapons would be the fastest, stealthiest way to defy a new American president who has declared that stopping proliferation is Job No. 1.

It is unclear whether the American intelligence community would pick up the signals that it missed in Syria. And if it did, a crisis might not be contained in the Korean Peninsula; it could spread to the Middle East or Southeast Asia, or wherever else North Korea found its customers.

Honda has been making increasingly generous offers — or perhaps desperate offers — to settle the strike. The company has already offered increases in total compensation of close to 50 percent, according to crumpled-up copies of the offer provided by striking workers.
There were signs on Saturday that the Honda strike was beginning to test the government’s patience. After two days of allowing surprisingly extensive coverage by state-controlled media, the authorities imposed a blanket ban on domestic coverage, reverting to their usual policy of hushing up labor disputes.
Labor advocacy groups say that they hear of frequent strikes in China, with work stoppages occurring somewhere every day. But strikes are typically hushed up and are often resolved in a day or two by the authorities, either with the police or through pressure on employers and workers to resolve their differences
Honda is not alone in facing intense pressure to raise wages. Foxconn, a giant electronics manufacturer near here in Shenzhen, said on Friday that it would raise wages by about 20 percent after being deeply embarrassed by a series of suicides by workers this year and criticism of working conditions.

The overall effect of wage increases on China’s competitiveness is not entirely clear, because of incomplete national data on average wages and productivity. Nicholas Lardy, a specialist in the Chinese economy at the Peter G. Peterson Institute for International Economics, said that Chinese productivity was rising so quickly that actual labor costs per unit of production appeared to be flat.

One surprise of the strike here is that it involves laborers whose wages appear to have already roughly doubled in the last five years: blue-collar workers in export factories in the Pearl River delta region around Hong Kong.
By contrast, the wages of young college graduates have actually declined in recent years as China has rapidly expanded its universities and built new ones, creating a surplus of more highly educated workers.

The president of a big Chinese corporation, who insisted on anonymity because of the sensitivity of labor issues, said that his company paid 4,000 renminbi a month a decade ago for recent graduates with computer science degrees, which is $585 at current exchange rates, and only 3,500 renminbi now.

If anything, conditions are growing worse for new college graduates, not better. A survey in Beijing released earlier this month by the Communist Youth League Beijing Committee and the Beijing Youth Stress Management Service showed that a fifth of new college graduates with bachelor’s degrees and a tenth of graduates with master’s or doctoral degrees were willing to work for free in their first jobs because they despaired of finding paid work.

The government has tried to respond to the glut of college graduates by ordering state-owned enterprises to hire large numbers of them and try to find tasks for them to do. But these enterprises are increasingly expected to be profitable and have not absorbed all of the graduates, with the result that big cities in China have growing numbers of unemployed or low-paid college graduates.
These graduates are typically the only child in a family because of China’s one-child policy, and their families have frequently invested much or all of their savings in their educations.

Partly because so many young Chinese now go to university and partly because of a declining birth rate, the number of young Chinese available for factory work is falling far short of the demand from employers. That is producing higher wages for blue-collar workers and giving them leverage to demand even more, as the Honda strike shows.

If wages do rise, that could bring higher prices for Western consumers for goods as diverse as toys at Wal-Mart and iPads from Apple.

The Chinese media may also have found it a little easier, politically, to cover this strike because Honda is a Japanese company, and anti-Japanese sentiment still simmers in China as a legacy of World War II. Certainly, the strike is hitting Honda hard, as the resulting shortage of transmissions and other engine parts has forced the company to halt production at all four of its assembly plants in China.
Honda has an annual capacity of 650,000 cars and minivans in China, like Jazz subcompacts for export to Europe and Accord sedans for the Chinese market. Because Honda’s prices in China are similar to what it charges in the United States, the cars tend to be far out of reach financially for most of the workers who make them.

A Honda spokeswoman declined to discuss specific issues in the strike negotiations.

The intense media coverage may evoke historical memories of the 1980 shipyard strike in Gdansk, Poland, that gave rise to the Solidarity movement and paved the way for the fall of Communism in Eastern Europe. But the reality here is much different.

Instead of tens of thousands of grizzled and angry shipyard workers, the Honda strike involves about 1,900 mostly cheerful young people. And the employees interviewed say their goal is more money, not a larger political agenda.

“If they give us 800 renminbi a month, we’ll go back to work right away,” said one young man, describing a pay increase that would add about $117 a month to an average pay that is now around $150 monthly. He said he had read on the Internet of considerably higher wages at other factories in China and expected Honda to match them with an immediate pay increase.
The profile of striking workers seems to run more along the lines of slightly bookish would-be engineers — perhaps without the grades or money to attend college — rather than political activists. Besides their low wages, the workers seem focused on issues like the factory’s air-conditioning not being cool enough, and the unfairness of having to rise from their dormitories as early as 5:30 for a 7 a.m. shift.Workers said that in addition to their pay, they also received free lodging in rooms that slept four to six in bunk beds. They also get free lunches, subsidized breakfasts for the equivalent of 30 cents and dinners for about $1.50.
Although China is run by the Communist Party and has state-controlled unions, the unions are largely charged with overseeing workers, not bargaining for higher wages or pressing for improved labor conditions. And they are not allowed to strike, although China’s laws do not have explicit prohibitions against doing so. Workers at the Honda factory dormitory said that the official union at the factory was not representing them but was serving as an intermediary between them and management. Li Jianming, the national spokesman for the All China Federation of Trade Unions, declined to comment.

Look at China’s response at the weekend, for example, to the latest outrage by its ally, North Korea. The regime of Kim Jong-il made an unprovoked torpedo attack on the South Korean navy corvette, the Cheonan, killing 46 crew.

Pressed at the weekend by the leaders of Japan and South Korea to discipline North Korea, the Chinese Premier, Wen Jiabao, conspicuously declined. He refused even to acknowledge North Korea’s culpability, which has been affirmed by a five-nation investigation by marine experts.

Wen emerged from a summit with Japan and South Korea on Sunday to say that “the most pressing task now is to appropriately deal with the grave impact of the Cheonan incident, gradually ease the tense situation and, especially, avoid clashes”.

The problem is that the clash has already happened. And, once again, China, the only big power with any real influence over Pyongyang, is showing no inclination to restrain its rogue client.

China pretends that the status quo is peaceful, rather than acknowledging that the status quo is actually a highly destabilising series of North Korean provocations, attacks and killings. And the aggressor is its ally.

By taking this approach, Beijing demonstrates that it cares more for power than peace. It protects its dangerous client to preserve its own sphere of influence. This is not the behaviour of a great power that wants to reassure its neighbours.

Speaking of countries’ reactions to China’s growing power, Michael Wesley observes: “There is a logic here, and it’s paralleled by a lot of other countries in the region – as countries’ economies become ever more enmeshed with China’s, the feeling of ambivalence towards China becomes ever more pronounced.

“Countries seek to construct offsetting relations with other powers. That’s the case in Australia, but also in Vietnam, India, Indonesia and other south-east Asian countries.”

The Lowy poll confirms that Australians are increasingly anxious about China’s rise. On the one hand, Australians have made an unprecedented acknowledgment of its economic ascendancy, and at the same time express growing alarm at its intentions.

Asked if China’s aim is to dominate Asia, 60 per cent of Australians last year said yes. This year that proportion had risen to 69 per cent.

Should Australia, the pollsters asked, join other countries to limit China’s influence? Last year 51 per cent replied yes; this year 55 per cent did.

Similarly, about two-thirds of Australians disagree with the proposition that Australia’s interests would not be harmed by an increase in China’s power. And a rising majority – up from 50 per cent last year to 57 per cent this – of Australians say that the government is allowing too much Chinese investment.

The more Australians see of China’s power, the more anxious we become about the consequences. And the more we resist its encroachments.

Will China, the pollsters asked, become a military threat to Australia in the next 20 years? A minority, 46 per cent said yes, but the minority is fast becoming a majority, up by 5 percentage points in a year.

So it’s probably no coincidence that the same poll also shows the level of Australian public support for the ANZUS alliance is at its highest in the five-year history of the survey.
The more we fear China, the more we look to the US for reassurance, it seems. This puts the Australian government in an increasingly conflicted position. As China becomes economically more powerful, how should Canberra nevertheless retain a strong alliance with America?

Wesley suggests that the trick is for Washington to understand the pressures on Canberra, and for “the Americans not to expect Australia to make ever more explicit statements of allegiance”.

Yet that seems to be exactly what the Australian public increasingly wants – a clear US alliance as a strategic chaperone to our hot Chinese dalliance.

Multimillionaire businessman Prayudh Mahagitsiri is now No. 21 on the latest installment of an expanding financial blacklist issued by the Center for the Resolution of the Emergency Situation, a body handling Thailand’s gravest political crisis since the founding of the modern Thai state in 1932.

Prayudh, along with 151 other businessmen, politicians, lawyers and other alleged financiers of “red shirt” protests, has seen his bank accounts frozen and been ordered to report details of all financial transactions since September to authorities. The aim, said an emergency decree signed by Gen. Anupong Paochinda, is to root out threats to “national security and the safety of citizens” and “get rid of this problem effectively and immediately.”
…
“They are tightening the noose,” said Thitinan Pongsudhirak, a professor of political science at Bangkok’s Chulalongkorn University. Arrests, censorship and the financial inquest have put Thailand on “a slippery slope,” he said, adding: “The creeping fear is that this could become a witch hunt. The question is: Who is next?”

Noppadon Pattama, a former foreign minister whose bank accounts have been frozen, denounced the financial probe as “clearly politically motivated.” Like many on the financial blacklist, Noppadon is close to Thaksin.

The government denied engaging in a political vendetta. The money probe, said spokesman Panitan Wattanayagorn, is “not a tool for political conflict” but a response to a security threat. “People who have nothing to hide have nothing to worry about,” said Panitan, a political scientist who taught for a time at Johns Hopkins University.
Twenty companies, most of them owned by relatives or close associates of Thaksin, are also under investigation. Like individuals on the list, they are barred from making bank, stock, insurance or other transactions without government permission. Authorities have made public no evidence of wrongdoing and have stumbled over details: One blacklisted company closed years ago.

Thailand’s business community, like the rest of the country, is bitterly divided.

When Bangkok lurched toward anarchy last week, mostly pro-Thaksin red shirts turned with fury on property owned by rich families they viewed as hostile or lukewarm to their movement. Police stood by as rioters torched branches of Bangkok Bank and the country’s biggest shopping mall, CentralWorld.

The arson attacks mirrored, albeit with far more violence, a campaign launched in early 2006 by opponents of Thaksin to boycott businesses close to the then prime minister. Six months later, the military removed Thaksin and set up a commission to investigate his business network.
That investigation began a long effort to choke off Thaksin’s money. It climaxed in February when Thailand’s Supreme Court confiscated $1.4 billion of frozen Thaksin assets. The court ruling allowed him to keep about $900 million. Soon after the court decision, red shirts began mobilizing for an occupation of downtown Bangkok.

Sean Boonpracong, a former resident of Herndon, Va., who helped lead the red shirt invasion, said after release from military interrogation over the weekend that protesters got $130,000 a day — far less than official estimates — from “friends of Thaksin” for food, generator fuel and other supplies. He denied that any had been used to buy weapons, adding that red shirts discussed setting up an armed wing but rejected the idea.

Some of those on the blacklist sympathized with the red shirt cause, which boiled down to a demand that the government quit and call early elections that would possibly return Thaksin’s allies to power. A shopping center owned by one targeted businessman leased space to a host of now-defunct red shirt ventures, including an anti-government TV station, a journal called Red News, the Red Cafe and also the Red Shop, filled with Thaksin dolls, Thaksin T-shirts and books praising Thaksin.

Other tycoons suffered heavy losses from the turmoil they’re accused of bankrolling. Particularly hard hit was Panlert Baiyoke, owner of the Baiyoke Sky Hotel, an 88-story Bangkok landmark with 658 guest rooms. The hotel had just one guest last week. This week it had 20.

Prayudh, the coffee maker and chief executive of a steel venture called Thainox Stainless, declined to comment on allegations that he helped fund the protesters.

The government has given no evidence of misbehavior by Prayudh other than a long association with Thaksin. The corporate headquarters of Thainox displays a 2001 photo of Prayudh receiving a business award from Thaksin.

Prayudh made his first big money from a coffee joint venture set up in 1972 with the Swiss multinational Nestle. Nophadol Siwabur, director of corporate affairs for Nestle in Thailand, said the blacklist “is essentially a private matter for Mr. Prayudh.” Nestle, he added, “keeps a strict neutrality in political matters.”

This hasn’t helped Nestle escape the consequences of politics: Its Bangkok offices were in CentralWorld, the shopping and office plaza torched by protesters.

This month, nearly 600 drug addicts broke out of a rehabilitation center in the northern Vietnamese city of Haiphong. The addicts overpowered guards at the state-run treatment facility and made a break for it. “We were completely overwhelmed,” a security guard told the Associated Press. “Forty of us were not able to prevent them, many with canes and bricks, from escaping.” Videos on the Internet show crowds of escapees marching through city streets.

Why were hundreds of patients fleeing treatment? Because in Vietnam, “treatment” looks a lot more like forced labor, complete with beatings and years of involuntary detention. Like neighboring Cambodia, China, Laos, Malaysia, and Thailand, the government of Vietnam has adopted a “get-tough” approach to drug treatment rather than evidence-based treatment. In Vietnam, more than 100 government-run facilities detain between 35,000 to 45,000 people for extrajudicial sentences of up to four years
Vietnamese in these treatment centers are engaged in what the government calls “therapeutic labor”: long hours at menial jobs for below-market wages — whatever’s left, that is, after the centers deduct for the cost of their meager food and Spartan lodging. Those who fail to meet work quotas are beaten. Patients who violate center rules can be locked in solitary confinement. “[T]hey beat people up, kicked the face, kicked the chest,” a former resident of a rehab center near Hanoi told the BBC in 2008. “Later, people were made to work very hard. They said work to forget the addiction, work is therapeutic.”

Opium cultivation and smoking are not new phenomena in Vietnam. But with economic liberalization and increased migration since the 1980s has come greater economic polarization and drug abuse. It is estimated that there are more than 100,000 injecting drug users in the country today, and nearly one in three is HIV infected.

Drug treatment hasn’t kept pace with increasing abuse, and aside from some small-scale programs, allowed by the government but largely funded by other donors, effective treatment is virtually nonexistent. Instead, the government emphasizes compulsory, institutionalized treatment that isn’t just inhumane, but also next to useless. Government reports have said that 70 to 80 percent of those who spend time in a center return to drug use. Other estimates put the rate closer to 90 percent — and when drug users do relapse, they have no place to go, especially not to a compulsory “treatment” center. According to a study published this spring in the Journal of Urban Health, drug users in Vietnam who have been in rehab centers are more likely to be infected with hepatitis C than those who have not. Another study found that detention and fear of police led to greater risk of HIV infection among Vietnamese users.

In fact, Haiphong’s escapees probably stand a better chance on the outside, if they can stay there: The city is one of three in Vietnam that is piloting the use of methadone to manage opiate addiction, the preferred approach in most developed countries. Indeed, trials of methadone maintenance therapy were already successfully conducted in Hanoi in the mid-1990s. So why not increase the number of slots in the Haiphong methadone clinic and offer the escapees voluntary enrollment? The U.S. government could help ensure that those who escaped can access services by redirecting its funding, which currently goes to HIV-treatment programs inside these abusive centers (though not the centers themselves), to programs based in the community.

Indeed, were Haiphong to expand access to the community-based drug treatment services it already offers and add counseling, employment prospects, and housing assistance, the city could become a model of humane and sustainable treatment. Those who were only occasional drug users — and who don’t need drug addiction treatment in the first place — are more likely to find meaningful work and social support networks in the community to avoid becoming addicted. Serious addicts and casual users alike are likely to find better HIV prevention programs and services in the community.

Drug rehabilitation should provide drug users with a chance to regain control of their lives, repair broken relationships, and overcome destructive addictions. Rehab in Vietnam ruptures the lives of drug users, severs social support, and pretty much guarantees a return to drug use after years of abuse. No wonder drug users are escaping.

May 27, 2010

China is different in two respects that may seem contradictory. On one hand, major industries like oil, telecommunications, banking and aviation are deemed strategic and are under tight state control. Of the 22 Chinese corporations listed on the Fortune Global 500, 21 are controlled by China’s central government or state-run banks. Just one, Shanghai Automobile, is run by a local government. None are privately owned.

These “national champions,” as the government deems them, are the vanguard of China’s push into global markets, and the evangelists of Chinese economic values.

On the other hand, light industry, retailing and the nation’s booming export sector are more free to play by Adam Smith’s rules. In contrast to Japan, in China Western retailers and consumer goods, from Wal-Mart to Snickers to Tesco, are ubiquitous and compete vigorously with homegrown competitors. And many of China’s leading exports, like iPods and Nike sneakers, are manufactured by or for foreign multinationals that retain most of the profits from their sale.

“The fundamental problem of the Thai political system is that most of the money is in Bangkok and most of the votes are outside of Bangkok,” Mr. Jackson said, describing the impasse.
..
“What the Thais have come up against is what the Brits came up against in 1832, when the aristocracy of Britain had to decide, ‘Will we enlarge the franchise to give people who are not like us some real power in society?”’ Mr. Jackson said. “The Brits made the right decision. Will the Thais make the right decision? Unless Bangkok finds a compromise method for sharing power, political instability and even violence may continue.” “Thailand is not really in such bad shape,” he said. “There’s no ethnic conflict; there’s a strong sense of national identity; it’s got a lot of economic promise. As bad as Thaksin was, after a cooling off period, it has no choice but to go ahead with new elections, and to let the chips fall where they may.”

The traditional full-wrap motorcycle helmet has been streamlined and equipped with cooling vents to more closely resemble a bicycle helmet, then adorned with all manner of decorations. In a land that once relegated everyone to frugal, androgynous apparel, what better way to strut your stuff than to turn the humble necessity into a raging fashion statement?

Of course, with most helmets costing less than $10, it’s not clear how solid their safety credentials are, even if they bear the requisite certificates. And then there’s the foldable helmet with air pockets in the ribbing that inflate and deflate like travel pillows to better fit in a purse or briefcase.

“People didn’t wear them before because they looked stupid, a bit like Gazoo in ‘The Flintstones’ on their smaller Vietnamese frames,” says Ralf Matthaes, managing director at Ho Chi Minh City-based TNS Vietnam, a market analysis firm. “Now the helmets are personalized, with stickers, you name it. It’s a really good indication of what’s happened with youth culture here. People really want to stand out in a crowd.”
With so many motorcycles on the road, more than half of Vietnam’s 13,000 annual traffic fatalities are from head injuries — twice as many as in the United States. Fortunately, the figures are edging down with the new law.
There’s an $8 fine if police catch you without a helmet, a pretty serious disincentive in a country where low-end helmets cost $2. Then again, who would be caught dead in a low-end helmet?

“It’s money for the police, although there’s generally too few of them to catch you,” Nguyen says, showing off his black helmet. “With helmets, safety is definitely an afterthought. It’s really about fashion … and not getting caught.”